Yum gives weak outlook

TessStynes

Yum Brands Inc. projected 2015 earnings growth of at least 10%, with the potential to exceed that, depending on how quickly its China division's sales can recover from the country's food safety scare earlier this year.

The company also said that sales in its China division have continued to recover, but at a slower pace than expected, resulting in a still weaker outlook for its 2014 per-share earnings.

Analysts polled by Thomson Reuters recently forecast that Yum's per-share earnings would increase 17% next year to $3.78.

The restaurant operator warned in late July that reports about a Shanghai supplier intentionally selling meat beyond its shelf life to fast-food companies were weighing on sales at its KFC and Pizza Hut locations in China.

At the time, Yum said that although the Shanghai supplier's owner, U.S.-based OSI Group, wasn't a major supplier to Yum's restaurant chains, its brands had been affected by the extensive news coverage. The latest food scare in China--Yum's largest market--came as the company was recovering from concerns about KFC chicken suppliers in China nearly two years ago.

The company's incoming chief executive, Greg Creed, who takes the helm Jan. 1, said in a news release Tuesday that Yum has "solid plans" to drive stronger sales and margins in its China division, while also continuing to open new restaurants.

For the current year, Yum now expects that sales at stores open more than a year in its China business will decline in the mid-single digits, with per-share earnings growth in the mid-single digits. In October, Yum had lowered its forecast for per-share earnings growth to between 6% and 10% from a previous forecast for growth of at least 20%.

The company plans to provide a business update during its annual investor meeting set for Thursday in New York starting at 8:45 a.m.

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